EU ETS reforms: Proposed changes for CORSIA prepared for take off

Following its review of the EU Emissions Trading System (EU ETS), the European Commission published its proposed amendments to the EU ETS (Directive 2003/87/EC and Decision (EU) 2015/1814) (the Proposal) in an explanatory memorandum on 17 July 2026. This includes proposed amendments to the implementation of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).

The proposed amendments are intended to prepare the EU framework for the start of CORSIA’s mandatory second phase in 2027 and to ensure continued alignment between the EU ETS and the evolving international carbon pricing regime for aviation. Although the proposed amendments are relatively targeted, they provide an early indication of how the Commission intends to balance the relationship between the EU ETS and international carbon pricing in aviation over the coming decade. 

Although operators would not be required to pay twice in respect of the same emissions, under the regime outlined in the Proposal, EU operators would be subject to higher compliance costs in respect of aviation emissions as compared to operators who are only subject to the CORSIA regime. 

Airlines operating international routes and stakeholders in the aviation sector should consider monitoring the legislative process closely.

CORSIA Overview  

CORSIA is the global carbon offsetting scheme adopted by the International Civil Aviation Organization (ICAO) to address CO₂ emissions from international aviation. Unlike the EU ETS, which applies a carbon price to flights within its scope through the surrender of European Union Allowances (EUAs) (of which a capped number are issued under the EU ETS), CORSIA requires participating States to introduce domestic rules requiring aircraft operators to offset a proportion of emissions from eligible international flights through the purchase and cancellation of approved carbon credits (rather than EUAs).

The current voluntary phase concludes at the end of 2026. From 2027, the Second Phase begins and will apply to States participating in accordance with the ICAO Assembly Resolution, subject to certain exemptions. 

For further information about CORSIA and its implementation in the UK, please see our previous article. 

Key proposed changes

The EU ETS reforms focus on the incoming Second Phase of CORSIA’s implementation, to start from 2027. The key changes are set out below. 

Closer alignment of geographical limits

The Proposal clarifies how the EU ETS implements the geographical scope of CORSIA. In particular, emissions from flights to and from least developed countries (LDCs) and small island developing States (SIDS) would continue to fall outside the scope of CORSIA, reflecting the exemptions provided under the ICAO framework.

The Proposal also refines the treatment of long-haul routes by excluding flights involving aerodromes located more than 5,000 km from the aerodrome of Frankfurt, provided the aerodrome is located outside the European Economic Area. This clarification is intended to ensure greater consistency between the EU legislation and the underlying ICAO rules governing CORSIA's scope. These geographical scope provisions would apply from 2029, for a period of four years until the end of 2032, in line with the extended EU ETS coverage of extra-EEA departing flights described below.

EU ETS scope expansion to smaller aircraft and business flights

The Proposal proposes to broaden the aviation activities covered by the legislation. The EU ETS currently covers a list of specified activities including commercial air transport above certain thresholds relating to emissions and number of flights.

The Proposal removes the number of flights as a threshold for the EU ETS and instead introduces a single simplified emissions threshold applicable to all aircraft operators. The practical effect is to bring operators of business aircraft (i.e. non-commercial aviation including private jets) within the scope of the regime. Previously, such operators generally fell outside the EU ETS because they operated fewer flights than the relevant thresholds, rather than because of their emissions levels. This change reflects the Commission's aim of ensuring a more comprehensive and consistent application of carbon pricing across the aviation sector.

No double charging – the CORSIA deduction mechanism

Under the current framework, the EU ETS and CORSIA operate cover different routes and do not overlap: the EU ETS applies to intra-EEA flights and departing flights to Switzerland and the UK, whilst CORSIA covers international flights outside that scope. 

However, the Proposal introduces a new risk of overlap. As noted below, the Proposal would extend EU ETS coverage from 2029 to certain extra-EEA departing flights within 5,000 km of Frankfurt. Those same routes may also be subject to CORSIA offsetting obligations, meaning that operators could in principle face carbon costs under both regimes for the same emissions. 

To address this, the Proposal amends the EU ETS Directive so that each aircraft operator would be required to surrender a number of allowances equal to its total verified emissions, reduced to account for costs incurred from CORSIA offsetting on routes subject to both regimes. The deduction is calculated by reference to the ratio between the average price of EU ETS allowances and the average price of eligible CORSIA credits, using best available price indices published in the Commission's annual Carbon Market Report. This mechanism is intended to ensure that aircraft operators are not required to pay twice for the same emissions.

The CORSIA regime does not necessarily require operators to offset 100% of their emissions. Although operators would not be required to pay twice for the same emissions, under the regime in the Proposal, operators subject to the EU ETS would be required to surrender allowances under the EU ETS in respect of emissions covered by CORSIA, but which are not subject to a CORSIA offsetting obligation. Operators subject to the EU ETS could therefore be subject to higher compliance costs than operators who are only required to comply with the CORSIA regime. 

Full implementation of CORSIA in the EU until 2035

The Commission proposes to continue implementing CORSIA within EU law until 2035. The Proposal inserts a new mandatory obligation requiring the Commission to submit to the European Parliament and to the Council (and to publish) a report assessing CORSIA's environmental effectiveness by 1 July 2032. That assessment will consider, amongst other things, participation levels, the robustness of enforcement, transparency, the integrity of offsetting arrangements and the treatment of sustainable aviation fuels.

The future scope of the EU ETS for aviation will depend on the outcome of that assessment. The Commission's 2032 report is required to be accompanied by a legislative proposal, where appropriate. If CORSIA is found to provide an ambitious and effective international framework – specifically, if (i) CORSIA has been strengthened in line with achieving its long-term global aspiration towards meeting the Paris Agreement goals, and (ii) States participating in CORSIA represent more than 70% of international aviation emissions – the accompanying proposal would restrict EU ETS carbon pricing for aviation to flights within the EEA and certain neighbouring jurisdictions. Conversely, if CORSIA is considered not to deliver sufficient environmental ambition, the Commission leaves open the possibility potentially expanding the scope of the EU ETS for international aviation.

Next steps 

The Proposal will be considered by the European Parliament and the Council under the ordinary legislative procedure; it may be amended as part of the legislative process. The Commission's 2032 review would also be a key milestone, as it could determine whether the EU ETS or CORSIA will have a broader role in regulating international aviation emissions in the EU going forwards.